Under the deal Cisco, a San Jose, Calif.-based networking giant, will pay in cash and assumed equity awards for Ann Arbor-based Duo Security's outstanding shares, warrants and equity incentives, Cisco vice president of corporate development Rob Salvagno said Thursday on an investor and media call.

The acquisition is expected to close in the first quarter of Cisco's fiscal 2019. Duo Security co-founder and CEO Dug Song will continue to lead his Ann Arbor company as its general manager. The firm will become part of Cisco's networking and security unit led by David Goeckeler.

The impact on Duo Security employees is unclear. The networking giant plans to take on the "vast majority" of Duo Security's 740 employees, Cisco spokesman Jim Brady told Crain's in an email.

"The combination of our companies will help build on the promise of doing the right thing for our customers," Song said during the call.

He also touched on 8-year-old Duo Security's philosophy, rise and next steps in a published letter to employees.

"With this deal, we will realize significant value for our shareholders, while gaining the opportunity to leverage Cisco's global scale and resources to democratize security faster without compromising our vision," he wrote. "They agree with us on the past state of security, and we're going to fix it together. They've had a long and successful history of acquiring companies to support and accelerate their strategic initiatives."

Duo Security's success has come from a philosophy of respect and a streamlining of an often overly complicated industry, Song said in his letter. And it will continue that trajectory after the acquisition, with Cisco's larger scale and resources.

Impact on employees

The Ann Arbor company's healthy growth margins, range of customers and subscription-based revenue made it desirable, Cisco's Salvagno said. The acquisition is part of a move toward software and recurring revenue streams for Cisco, traditionally a designer and manufacturer of IT and networking products.

More details on integration and branding are to come as planning progresses, Brady said.

Cisco sees Michigan as a state with "desirable ... resources, rich talent pool, and infrastructure," he said in the email. It aims to grow Duo Security's presence here.

Song acknowledged in his letter to employees that they must be "wondering what this means for each of you" and said the company's values remain the same. But he did not provide more details on any potential staffing changes, or lack thereof.

A Duo Security representative directed questions to Cisco. Song was not available for comment Thursday.

The leader of Ann Arbor Spark, a business development nonprofit, sees the purchase deal on the heels of the record-breaking fundraising round as evidence against the myth that a tech company must set up on a coast to succeed.

"As we’ve seen before, global firms are paying attention to the technology being born and raised in Ann Arbor, and consider the companies driving those innovations a solid investment," Ann Arbor Spark President and CEO Paul Krutko said in an emailed statement.

Duo Security's reach has extended from Ann Arbor to Detroit. It had announced plans this spring to move 30 employees to downtown Detroit as part of a strategy to build its presence in the city and the city's tech ecosystem.

It reported more than $100 million in annual recurring revenue for 2017, up from $73 million in 2016. It has 12,000 customers, including Facebook and Paramount Pictures. In addition to its Ann Arbor and Detroit hubs, it has offices in Austin, Texas; San Mateo, Calif.; and London.

Cisco (NASDAQ: CSCO) reported $48 billion in revenue in fiscal 2017, a 2 percent decline from 2016's $48.7 billion. The global company had 72,900 employees as of 2017. It designs, makes and sells IP-based networking products for the communications and IT industries, and provides related services.